2019 (4) TMI 231 - SC - Indian Laws

Supreme Court rules in favor of flat purchaser, orders refund with interest and compensation for service deficiency

The Supreme Court upheld the National Commission's decision in a case involving deficiency of service by a builder. The Court ruled in favor of the flat ... Deficiency of service - unfair trade practice - one-sided and unconscionable contractual terms - termination of buyer's agreement by filing a consumer complaint - refund with interest as equitable relief - application of Rule 15 of the Haryana Real Estate (Regulation and Development) Rules, 2017 for rate of interest - reasonable time for delivery of possessionDeficiency of service - reasonable time for delivery of possession - Delay in obtaining the Occupancy Certificate and handing over possession amounted to deficiency of service and entitled the flat purchaser to relief. - HELD THAT: - The Court held that the builder obtained the Occupancy Certificate and offered possession only after an inordinate delay beyond the period stipulated in the Apartment Buyer's Agreement, which constitutes a failure to hand over possession within a reasonable time. Relying on precedent that service by a builder/contractor for consideration falls within the Consumer Protection Act and that a purchaser cannot be made to wait indefinitely, the Court found a clear case of deficiency of service and that the purchaser was entitled to seek refund and compensation rather than be compelled to accept belated possession. [Paras 6, 9]The delay amounted to deficiency of service; the purchaser could not be compelled to take possession and was entitled to the relief claimed.Termination of buyer's agreement by filing a consumer complaint - one-sided and unconscionable contractual terms - unfair trade practice - Filing the Consumer Complaint amounted to a valid termination of the Agreement and the contractual clauses that were wholly one sided/unfair could not bind the purchaser. - HELD THAT: - The Court examined the contractual scheme and observed stark disparities in remedies available to the parties, noting clauses that permitted the builder to levy high interest, cancel allotments and forfeit sums while restricting the purchaser's remedial rights. Such ex-facie one sided terms were held to constitute unfair trade practices under the Consumer Protection Act. In the circumstances, the purchaser was justified in terminating the contract by instituting the consumer proceedings and could not be forced to accept possession offered after prolonged delay. [Paras 6, 7]The purchaser's complaint operated as termination; the one sided contractual terms were unenforceable as unfair and constituted an unfair trade practice.Application of Rule 15 of the Haryana Real Estate (Regulation and Development) Rules, 2017 for rate of interest - refund with interest as equitable relief - The National Commission was justified in awarding interest at the rate derived from Rule 15 of the Haryana RERA Rules, 2017 (10.7% S.I. p.a.) for the periods awarded, and in structuring the periods for which interest was payable. - HELD THAT: - The Court found the National Commission's order equitable: interest was awarded from the date of each installment till the date when the stay restraining cancellation operated, and thereafter from the date of the Commission's final order until refund. The Court rejected the builder's contention that contractual rates (6% or 9%) must limit the Commission's award, relying on authority that an allottee is entitled to refund with reasonable interest when possession is not delivered in time and approving application of Rule 15 to fix the rate of interest in the circumstances. [Paras 3, 8]Award of interest at the rate applied by the National Commission and for the periods ordered was lawful and was upheld.Final Conclusion: The Civil Appeals are dismissed; the National Consumer Disputes Redressal Commission's order dated 23.10.2018 is affirmed and the appellant is directed to refund the amount to the respondent within three months from the date of this judgment. Issues Involved:1. Deficiency of service by the builder.2. Entitlement of the flat purchaser to refund and compensation.3. Validity and fairness of the clauses in the Apartment Buyer’s Agreement.4. Rate of interest applicable on the refund.Detailed Analysis:1. Deficiency of Service by the Builder:The Supreme Court examined whether the builder's delay in obtaining the Occupancy Certificate and handing over possession constituted a deficiency of service. The builder was obligated to apply for the Occupancy Certificate within 39 months from the date of excavation, with a grace period of 180 days. The excavation commenced on 04.06.2012, making the final date for obtaining the certificate 04.03.2016. However, the builder failed to meet this deadline and only obtained the certificate on 23.07.2018. The Court cited *Lucknow Development Authority v. M.K. Gupta* and *Fortune Infrastructure & Anr. v. Trevor D’Lima & Ors.*, emphasizing that inordinate delays in handing over possession amount to a deficiency of service.2. Entitlement of the Flat Purchaser to Refund and Compensation:The flat purchaser filed a Consumer Complaint on 27.01.2017, seeking a refund of the deposited amount with interest and compensation for mental agony and litigation costs. The National Commission ruled in favor of the flat purchaser, holding that they could not be compelled to take possession after such a significant delay. The Supreme Court upheld this decision, stating that the purchaser was justified in seeking a refund due to the builder's failure to adhere to the stipulated timeline.3. Validity and Fairness of the Clauses in the Apartment Buyer’s Agreement:The Court scrutinized the clauses in the Agreement and found them to be one-sided, unfair, and unreasonable. For instance, Clause 6.4 (ii) allowed the builder to charge 18% interest on delayed payments by the purchaser, while the builder was only liable to pay 9% interest for delays in handing over possession. The Court referenced the Law Commission of India's 199th Report on unfair contract terms and *Central Inland Water Transport Corporation Limited and Ors. v. Brojo Nath Ganguly and Ors.*, concluding that the terms were oppressive and constituted an unfair trade practice under Section 2 (r) of the Consumer Protection Act, 1986.4. Rate of Interest Applicable on the Refund:The builder argued that the National Commission erred in awarding interest at 10.7% per annum, as the Agreement stipulated lower rates. However, the Court upheld the National Commission's decision, which applied Rule 15 of the Haryana Real Estate (Regulation and Development) Rules, 2017. This rule mandates that the promoter must compensate the allottee at the State Bank of India’s highest marginal cost of lending rate plus two percent. The Court found this rate just and equitable, especially considering the purchaser had to pay 10% interest on a loan taken to finance the flat purchase.Conclusion:The Supreme Court affirmed the National Commission's Final Judgment and Order dated 23.10.2018, dismissing the builder's appeal. The builder was directed to refund the amount deposited by the flat purchaser with interest at 10.7% per annum, excluding the period during which the stay order was in effect. The builder was granted three months to comply with the order.